OFFICIAL WEBSITE OF THE GOVERNMENT OF THE RUSSIAN FEDERATION

Government report on its performance in 2015

19 April 201613:55The State Duma of the Russian Federation, Moscow

“The Government of the Russian Federation <…> shall submit to the State Duma annual reports on the Government’s performance, including on issues formulated by the State Duma.” (Constitution of the Russian Federation, Article 114, Clause 1, Subclause “a”).

Transcript:

Government report on its performance in 2015

Dmitry Medvedev: Mr Naryshkin, Ms Matviyenko,
members of the State Duma, colleagues,

The Government
performance report I will deliver today is special in that there are State Duma
elections ahead, and we have worked together for nearly five years.

The Government
and the Parliament have reached a commendable level of interaction (and this is
not an exaggeration), which is why we have resolved many problems in the
economy and the social sphere. Of course, our positions have not always
coincided. Moreover, we sometimes held diametrically opposite views, which
resulted in debates, but this is fine. These debates helped us find the best
approach and the most preferable solutions, and to assume responsibility for our
country.

Retrospective

I’d like to
express my gratitude for your cooperation with the Government these past years,
for your support to us and our initiatives, for your understanding and your
ability to listen to others, which is a must for effective cooperation between
the Government and the State Duma.

This cooperation is especially important today, at
this difficult time. As you know, our economy has been under pressure caused by
several negative factors. They have been mentioned here, of course, yet I’d
still like to talk about them so that we have a complete picture of what went
on last year and what is happening this year.

The first factor is the low prices of oil and other
commodities. What matters is not only the depth of the plunge, which we saw
several times before over the past decades, but the speed of the fall.

But last
year the prices of oil fell by nearly 50 percent over six months, which is an
unprecedented speed of the fall. No economy
can quickly adjust to such a dramatic decline. It
was a major shock for our economy.

The second factor is sanctions against Russia. Russia is still cut off from a large share of
international credit resources and the market of modern technologies.

The third
factor is instability and unpredictability of global markets, which have been
increasingly affected by political considerations, as you surely feel, rather
than economic laws.

And
lastly, the main factor – I stress this, because I consider this to be the most
important factor – is the structural problems of our own economy, which have become
more acute amid the current crisis. We have discussed
this more than once, including in this hall.

This
combination of factors could have been lethal to us, to our country, had it
happened, say, in the 1990s. Given this kind
of pressure, it’s unclear whether the country could have survived within its current
borders had this happened in the 1990s. But
today we have not only survived, but we have the ability to develop and move
forward. Of course, we understand that the
government’s ability to allocate large funds to the economy and the social
sphere and to support the banking sector seriously depends on the export of
commodities and on access to foreign loans. But
we cannot, and more importantly, we must not fully depend on these sources.

I mean, if we want to remain a country possessing the
right to uphold its own position and its national interests, one that reliably
provides decent living conditions for the elderly and ensures its children's
future. This is what our work is focused on. I can assure you that our economy is
adapting to modern conditions. Two years ago things were entirely different,
both in terms of its structure and costs. There is diversification in our economy,
something we kept insisting that we vitally needed all along.

Our role in the global economic system is changing. In
fact, we have started to build a prototype of the next decade’s economy and we are
working on it together, along with other colleagues. Together we have gauged
every step and made difficult decisions which sometimes were the only possible
solution under those conditions. We tried to find balance between urgent anti-crisis
measures and structural reforms. But first of all we tried to do our best so
that our people were affected by the crisis as little as possible.

Of course, we have fielded our portion of criticism
and suggestions about seemingly simple issues, but it is the Government’s job to
thoroughly analyse all the implications and consequences of the moves we
make, even the smallest ones that are not visible immediately. The Government,
if you will, has to take an even more conservative position on such issues than
other branches of authority.

Government report on its performance in 2015

True, the country needs profound structural reforms;
the Government is well aware of that, but we also understand how this will
immediately reflect on the social sphere. Any forced reformation will
exacerbate and extend the crisis for a few more years.

This is why I
want to say, and I want you to hear me clearly, that we will not implement
reforms at the expense of the people.

It’s true that the economy is short of funds, but we
will not print more money to make up for the shortfall of budget revenues. Everyone
understands that this would be like printing paper, which will only spur
inflation and devaluate people’s incomes, salaries and pensions.

We had enough
of this in the 1990s. There is the temptation in the current situation to
introduce tough economic regulation, economic planning like we had in the past.
But this would only unbalance the economy in a different way, shattering
business and the economy as a whole. Other ideas vary from introducing a more mobilised
economy and nationalising large companies to selling out all state-owned assets.
But spectacular solutions are not always effective. All of these proposals are
only good for propaganda and can easily be condensed into eye-catching
political slogans, while having nothing in common with real work, because
politically attractive solutions are often very dangerous and sometimes even
lethal for economic growth.

More proposals of this kind will be made during the
election campaign. But there are certain laws, the laws of propaganda. There is
nothing out of the ordinary in these unwritten laws of election campaigns. But
I suggest that we change them. There must be only one law for elections: honesty.
When I say honesty, I mean not only the calculation of votes, which goes
without saying, but above all the honesty of election slogans and the promises
made by politicians. We must not promise what we are unable to deliver. There is political responsibility and the
responsibility of politicians during election campaigns. The latter kind of responsibility
is much bigger. Unfulfilled promises translate into public disappointment, loss
of public trust and, ultimately, the discrediting of the state, which includes all
of us, both the executive and the
legislative branches. I believe that no matter how different our views can be,
the future of the country is incomparably more important than any immediate
political considerations and election ambitions. There is no room for mistakes or
for any harsh or overemotional actions, because our mistakes will simply cost
us through the nose. The people and the economy can only survive reforms of a
certain speed and depth, which is why the Government will continue to operate
under the old principle: exclusively balanced solutions. We knew this when we
developed and implemented our anti-crisis plan last year. It not only cushioned
the negative consequences of the crisis, but also created the basis for further
development and even a number of structural reforms.

This plan was incorporated
in the Government’s action plan for 2016. The best and only possible answer to
the challenges facing us is the modernisation of our economic structure. A more
modern economy should be adjusted to people’s needs and aimed at creating
better goods and services for the global market. Although it was the LDPR group
that asked about ways to resume economic growth, I believe this question is of
concern to everyone in this room. It implies work that will last more than a
year, but if we want to achieve our goal we must start acting now, after
clearly determining the areas in which we will operate and the practical steps
we will take.

We identified five areas, without which
forward-looking development is impossible. These are: budget policy optimisation,
support for non-oil and gas exports and import substitution, improving the
business environment, enhancing state governance and, perhaps most importantly,
the development of the social sphere. I will address each of these areas in
detail.

First. Budget policy.

Needless to say, without an effective budget policy it
would be impossible to adapt the economy to the changing environment. Previously,
the approach towards budget planning was temporarily reviewed. Instead of a
three-year plan, we confined ourselves to a one-year budget. This allowed us to
respond to the current situation more promptly. However, today, even with the
risks and problems still in place, this is no longer necessary. We should
return to three-year planning. This will give us a better vision of the future.

The Government’s principal objective was to find a
balance between the need to cut spending amid the current crisis and the
provision of budgetary incentives to resume growth. This is a dilemma that
exists for every government during an economic crisis.

Government report on its performance in 2015

Overall, we have probably learned to cut spending. From
day one, we abandoned a formal approach towards balancing revenues and
expenditures (which, incidentally, was discussed here and which the State Duma
urged us to do), and, despite an austerity programme, the expenditure has even
increased by 788 billion roubles.

We did not carry out a proportional reduction of all
spending items although naturally such proposals were put forward. Spending
optimisation was careful. Reductions were made primarily in areas that were
characterised by low efficiency. This work has not been completed yet. Every
spending item has reserves for enhancing the payoff and achieving our
objectives in a more economical way.

We have managed to avoid amending the 2016 budget even
though this seemed inevitable at the beginning of the year. We have no plans to
amend the budget during the spring session. We addressed these tasks along with
the need to keep the budget deficit within reasonable limits, stabilise the
situation on the financial market and control inflation. It may be recalled
that the 2015 deficit was within acceptable limits, at 2.4 percent, even a
little less than planned. This is 2.5 times lower than during the 2009 crisis.
Nevertheless, economic security should be maintained and so we will work to
retain such budget positions, such close positions in terms of deficit in the
future.

Through additional capitalisation, we have stabilised the banks. The
outflow of deposit accounts gave way to an inflow. Despite all the costs and
the deficit of foreign liquidity, banks are increasing credit programmes for
the economy, though not in the amount we would like to see. During this year, inflation (year on year)
fell below 8 percent. This level is comparable to the post-crisis year 2010,
when the Russian economy resumed growth after a significant decline. We managed
to preserve quite a low level of sovereign debt. As a matter of fact, it is not
even quite low, but very low, compared to other countries. I could even describe
it as extremely low compared with other countries, and this, by the way, is our
competitive advantage, as all financial analysts and international financial
institutions point out. It was only about 13.6 percent of the gross domestic
product, which gives us the opportunity for a budgetary maneuver in the future. Just think of the debts other countries have.

Another point
that I would like to emphasise is that we have changed the structure of state revenues.
The share of revenue not related to oil and gas has increased to nearly 60
percent. In many ways, of course, this is due to the falling energy prices, but
the measures that we took have worked, too. This is a different model. The
economy can be stable even without the oil and gas windfall, something we have
now proved. Of course, we still have a lot to do to make the improvements
permanent. The question about economic restructuring also came from several parties – including United
Russia. I will say a few words about it later.

Second, we will
continue to work actively on import substitution and to support non-oil
exports. Our industry, like the rest of the economy, has suffered a serious
shock: a slump seemed inevitable in those circumstances. Last
year we made a lot of efforts to minimise losses. In early 2015 we strained to prevent a landslide
shutdown of businesses,
people being thrown out. Those were the targets of our 2015 plan, which helped
us not only to stabilise the most problematic areas, but also to continue to
seriously pursue import substitution. This structural reform will remain
essential for us in the coming years, regardless of what happens with all those
sanctions and so on. We need good, competitive Russian products. We need a
competitive industry as a whole. To this end, we have taken a number of steps.

Let me
remind you of some of them: the law on industrial policy came into force last year, also with some new support tools we didn’t have before, such as a
special investment contract mode, which guarantees predictable conditions for a
period of 10 years. The Industry Development Fund is functioning – last year
its advisory council approved 74 projects, which created over 10,500 new
high-tech jobs. This year, the Government decided to recapitalise the fund with
another 20 billion roubles. We applied other financial measures to support
enterprises, including subsidies, state guarantees, co-financing of research
and development, and measures to stimulate demand, including public procurement.
As a result, many industrial companies continued to implement their investment
projects, with state support or without it.

Of course, one year is not enough for us to draw any
conclusions, but we already have industries that have not only shown good performance,
but also claim to provide a basis for a new model of economic growth in our
country − an innovation-based industrial breakthrough, if you will. This
includes the chemical industry, certain sub-sectors of machine engineering, the
pharmaceutical industry, agriculture, and the food industry. As you may be
aware, the output of the mechanical engineering and the food industry products has
increased by almost 10 percent. Chemical production is up by almost 6.5
percent. The production of medicines is up by 26 percent. This has never
happened before. Food production increased by 2 percent, and agriculture, as you
may be aware, grew by almost 3 percent.

Here are some more
results by the industry. Agriculture, as I mentioned, has shown steady growth across
all positions. As a result, it grew by 3 percent, as I just mentioned.

We have for the first time achieved five out of eight
Food Security Doctrine benchmarks. We are now supplying enough domestic meat
and meat products to the market (not all items, but in general) and are
boosting our exports. We are now in a situation where we are able to not only cover
our own need for food, but also export foods, which we haven’t seen in a very long
time.

It happened also
due to an unprecedented decision − by the way, you and I are behind it – to
provide state support to agriculture. As many as 222 billion roubles have been
allocated to rural development, which is a decent amount. We will provide
additional support to our farmers in comparable amounts this year as well.

I have another point to make: in view of the importance
of agriculture and steady high agricultural growth rates, I decided to create an
extensive Government Commission on Agriculture, which I will head.

With regard to the fuel and energy industry, it was affected
by the overall situation on the market, but also performed decently.

Despite an unfavourable
global market situation, and sanctions levied against our companies, Russia
produced over 0.5 billion tonnes of oil. This is an all-time high in our
country’s recent history. The industry revenue grew not only because of the
positive effect of devaluation on corporate costs, but also due to a major tax move,
which, by the way, you and I developed. We were actively engaged in the
construction of a gas transportation infrastructure, including the Power of
Siberia main gas pipeline. In 2015, we built 42 km of it. This pipeline will
allow us to form additional markets for Russian gas in the Asia-Pacific region.
Most importantly, perhaps, for ordinary people, we will build household gas
supply lines along the entire length of the pipeline. People in the Far East are
looking forward to this.

Green energy is
another important part of our work. We have launched several solar power
plants. We will continue to develop environmentally friendly power plants.

Government report on its performance in 2015

We have built
and repaired over 3,000 km of federal and local roads. Of course, much more
needs to be done. During the direct line with the President, he asked us to look
carefully into how the road construction is funded. Last Friday, I was in
Saratov, where we discussed this issue and reviewed proposals on ways to
support our road network. We will adopt the appropriate decisions within our
current budget.

We have upgraded
airport hubs and sea harbours. The production capacity of Russian ports grew by
over 23 million tonnes in 2015. In addition, we upgraded the ports in Crimea
and the Caucasus, which are the key elements of the Kerch ferry. The first
pillar of a motor bridge across the Kerch Strait has been built. The
bridge
will
open
to
traffic
in
late
2018.

Eight airports have been modernised partly or in full
and work is in progress on another six. This is to address growing domestic passenger
traffic rates. Last year it exceeded international passenger numbers – for
understandable reasons. The Government will continue to take steps to maintain
accessible fare prices. In 2015, we offered five federal subsidy programmes for
this purpose. In addition, a 10 percent VAT rate has been imposed for domestic
service. A similar VAT rate has been introduced for long-distance railway
service. And don’t forget, there is zero VAT for commuter rail service. So, we’ve
mitigated dramatic fare increases. All of this has promoted the development of
domestic tourism. From this point of view, last year proved quite successful. Domestic
tourist numbers increased by over 20 percent. We’ll continue to work on
improving the tourist infrastructure, which includes the federal targeted
programme. Last year, nearly 4 billion roubles was allocated. Currently, the
programme involves 26 regions.

Russia’s defence industry is increasingly independent
of foreign suppliers. In 2015, output increased by 13 percent and the
manufacture of military equipment – by almost 20 percent. Compared with 2014, production
volumes increased (let me give you these figures, they are indicative): by 32
percent in the radio and electronics industry, 22.5 percent in the ammunition
and specialised chemical industry, more than 16 percent in the shipbuilding
industry, 7.5 percent in aerospace, and nearly 6 percent in the aircraft
industry.

Let me emphasise that the import substitution effort
in this strategically important area will, of course, be continued. This is simply
necessary for our survival and a guarantee of our sovereignty. Russian arms
manufacturers produce competitive products whose quality and reliability, far
from being inferior, are, in a number of respects, superior to their foreign
analogues.

We have been building up our exports, too. Last year,
export revenue, let me remind you, exceeded $14 billion. Contracts worth $26
billion were signed, while the overall order portfolio in late 2015 amounted to
$56 billion, which is an absolute record. Achievements by designers, engineers
and workers in the defence industry have made it possible to effectively rearm
the army and the navy. As a result of the successful fulfilment of state
defence orders in 2015, the share of modern equipment and weapons in the armed
forces has exceeded the plan indicators by 50 percent and now averages 47
percent.

Colleagues, a week ago we celebrated Cosmonautics Day. This year was
special, since we marked a number of important anniversaries. In fact, Luna-10,
the first artificial satellite, was launched 50 years ago, and 55 years ago
Yuri Gagarin carried out the first manned space flight in history of humankind.
It is important to note that our country has been able to ensure continuity as
a great space nation and did not give up on our ambitions in space exploration.
Last March, the ExoMars-2016 research
spacecraft took off from Baikonur Cosmodrome. This is a joint Russian-European
Mars exploration project. Russia’s contribution to this project is a set of
unique scientific experiments that will create the necessary groundwork for
further exploration of the Solar System and even the deep space.

Russia’s largest construction project is Vostochny Space Launch Centre,
our first national civilian cosmodrome which will provide us independent access
to space. All its facilities are expected to be completed in 2016. The first
Soyuz-2 launcher will carry spacecraft into space from Vostochny Launch Centre
in the near future. I think that events of this magnitude should make us all confident
that on top of having a track record of glorious achievements in the space
industry, Russia is also poised for glorious achievements in the future. By the
way, only recently, in late March, I approved a ten-year programme for space
exploration. The Government does not intend to curtail it.

Colleagues, residential construction is among the areas that have
succeeded to adapt to the new economic reality. Not least of all, this is
attributable to government support. In 2015, nearly 84 million square metres
were built, which is 10 percent more than the initial projection of 76 million
square metres under the relevant programme. Seeking to create incentives for
real estate developers, the Government has reduced the number of administrative
procedures required. Their total number dropped by an average 22 percent in
2015. All the formalities can now be completed one month faster. All in all, we
now have up-to-date legislation regarding residential construction.

In 2015 only, dozens of new plants were launched in Russia. It wasn’t so
long ago that we didn’t even have statistics showing what these production
units were. We used to have plenty of data on new cooperative societies and all
kinds of small companies, while not knowing anything about new production units.
No statistics existed on this issue, so there was nothing to count. Today,
these plants make cutting-edge products for the Russian market. I’m talking
about car engines and parts, various kinds of chemical and biotech products,
construction materials, food, power tools, industrial and power equipment and
defence industry plants.. By the way, I intend to meet with companies and
entrepreneurs who have launched new production facilities. We have things to
discuss.

In fact, we are about to restore the domestic market that for a long
time used to be dominated by imports. However, it goes without saying that
focusing exclusively on the domestic market would not suffice. A truly strong
economy is an economy that targets foreign markets. We have results to report
in this area as well. For instance, exports of reaction engines almost doubled,
while exports of computer parts surged by more than 70 percent.

We continued to develop a system for promoting industrial exports by
establishing the Russian Export Centre with a view of coordinating various
kinds of support, including searching for partners, promoting products, and
providing loans to buyers. This centre currently supports more than 300
projects.

A programme to subsidise loans granted by Vnesheconombank has been in
place for two years. These loans are intended for buyers of Russian
high-technology products. A similar programme was launched with Eximbank last
year. Export support provided to companies using these tools totalled 152
billion roubles.

We are also promoting Russian products within the Eurasian Economic
Union by removing mutual trade barriers.

Last year we signed a free trade agreement with
Vietnam, thereby accessing promising Asian markets. We are conducting talks on
the same issue with Iran, Israel, India and some ASEAN member states.

However, it goes
without saying that we should not just live for today. Technological changes
are taking place faster, and they are sweeping. Industrial robots, drones,
unprecedented IT-penetration and the tremendous scale of the digital economy
(incidentally, it has already reached 2.2 percent of the GDP, at almost one
trillion roubles) have become reality. What will happen in 10 or 20 years? Of
course, victory will go to those who stake their development on innovation and
build a system that can generate commercially successful decisions based on
this new knowledge. In this respect we not only need to catch up with the
leaders but surpass them. This is exactly the goal of the National Technology
Initiative (NTI), a comprehensive programme that brings together public and
private efforts. I have signed a resolution that improves the foundation of the
NTI. The Russian Venture Company has been defined as a project office for the
NTI; and the rules for drafting roadmaps, selecting projects and granting
subsidies for the implementation of these projects have been endorsed.

Esteemed members
of the State Duma, as a result of the adopted measures, the condition of the
economy allows us this year to provide targeted support for the priority
industries that largely influence the economy’s technological competence,
employment and related industries. I’d like to make a special mention of this –
under the economic plan for 2016 we are allocating funds to support the
following five industries: auto manufacturing, transport and agricultural
equipment manufacturing, light industry, and housing construction. Special
support programmes have already been endorsed for these priorities. However,
assistance for the real economy will not produce the desired effect if we don’t
have genuinely free entrepreneurship in our country. Let people work freely and
they will make money not only for themselves but also for the whole country. At
one time outstanding Russian physicist Sergei Kapitsa said that supervising
means not interfering with the work of good people. This is correct. I recently
discussed this issue at a meeting with the President. We talked about the draft
laws that need to be adopted. The desire of entrepreneurs to establish and
upgrade their enterprises and invest in their homeland and its development will
determine what our economy will be like in five to 10 years, and, of course,
will influence the living standards of all people regardless of whether they
work in the public or private sector or receive a pension.

Therefore,
improving the business climate is the third area of Government focus. All
parliamentary parties were interested in this. What does business expect from
the state? First, it wants the state to be predictable, especially with regard
to taxation. Now that oil prices have dropped, there is the temptation to
increase budget revenue by imposing higher taxes. But, as you know, our
position is different than that in principle and remains unchanged. We do not
plan to increase taxes until 2018.

It is good that you support our decision. No one needs the return of unreported wages and
increased capital flight.

Second, what business needs is for the state not to
interfere with its operation, for example by means of numerous inspections, as
I have said. We
had to clear the system of state regulation of the barriers that were created
back in the past, including in the Soviet era. We
did this through the roadmaps of the National Business Initiative. We have simplified procedures in construction, in
the registration of property rights, connection to the electricity system, and
in tax and customs management. As a result,
Russia has demonstrated sustainable progress in doing business rankings. Of
course, the importance of these rankings must not be overestimated, yet they
demonstrate the trends and dynamics. Our
country has risen from 120th to 51st place in the World Bank’s Doing Business
ranking in the last few years. This means that
we are moving in the right direction, even
though our achievements have not been uniform.

Of course, our
businesspeople need government protection. They want the state to protect their
property and to protect their businesses from pressure. Our businesspeople must
feel confident that no one will steal their businesses or initiate criminal
proceedings against them without good reason. I
am referring specifically to unsubstantiated criminal proceedings. If a crime
was committed, punishment for it must be unavoidable, but it also must be fair
and adequate to the gravity of the crime, rather than used as an instrument for
pressuring businesses in unfair competition.

Fourth, businesses need support where they cannot fare
alone. This implies creating a fair
competitive environment. Investors must have equal access to funds,
infrastructure and markets. The situation with
competition is not ideal in Russia. Access to the market is often given to
cronies, and tenders and competitions are held on a pro forma basis. We are
working to change this. Last year, we adopted the fourth antimonopoly package
after four years of discussions, including at the State Duma. We will continue to improve the system of state
and municipal procurement, as well as
procurement by state-owned companies. The
creation of the main agencies of the federal contractual system [of
procurement] is nearly complete. Thanks to
this, we saved over 300 billion roubles last year. The
involvement of small companies in the system of state and municipal procurement
is gradually increasing. Small business
revenues increased by almost 41 percent last year and reached almost 500
billion roubles. On 1 January of this year, we
introduced a system of strict regulation of state procurement in order to
preclude excessive spending and the purchase of luxury items. Last year, we adopted a federal law on
public-private and municipal-private partnership. This
law has formalised two new elements: private ownership of elements of public
infrastructure, and state guarantees of stability of the basic parameters for
investment decisions.

One of the business climate indicators is the condition
of small and medium-sized businesses. This year, we continued with the state
support programme for small and medium-sized businesses. Significant funds have
been allocated from the budget. A single development institution – Federal Corporation
for the Development of Small and Medium Businesses – was established to
coordinate the state support measures. The corporation has already provided
4,027 payment guarantees for over 22 billion roubles. This made it possible to
attract almost 50 billion roubles in loans. These are quite good figures.
Additionally, the corporation and the Central Bank of Russia started a concessional
lending programme. Some 20 billion roubles will be secured under this programme
this year.

Further, tax concessions for small and medium-sized
businesses may be introduced by resolution of regional authorities. We made an
agreement with the regions, and the final decision is theirs. They have a
better understanding of the local needs. We know that in the current
circumstances the regions are experiencing serious financial difficulties (we
already discussed this issue with the State Duma deputies). While providing tax
concessions to businesses, they have to worry about compensating for shortfall in
revenue. We helped the regions before, and we will continue to do so. In the
last year, the federal budget allocated over 1.6 trillion roubles in transfers
to the regions. Also, less costly budget loans were issued to replace expensive
commercial loans.

We are conducting an inventory check and assessment of
expenditure powers, for the first time since 2005. It is necessary to complete
the work as soon as possible and take decisions on financial provisions against
the liabilities of regions and municipalities. Then our decisions will not be
just empty declarations.

Aside from the funding, we must develop measures that
will help regional businesses to grow and attract investors, including from
abroad. We established the priority development areas (PDA), and continue
creating special economic zones, industrial and technology parks, and free
ports. There are currently 12 PDAs operating in the Russian Far East, with an
estimated investment potential of almost one trillion roubles. Starting 1
January 2016, PDAs can also be established in restricted territorial entities.
Similar action is being taken as regards single-industry cities that are not in
great shape, to be honest. So far, there are three such areas: in Tatarstan
(Naberezhnye Chelny), the Rostov Region (Gukovo) and the Irkutsk Region
(Usolye-Sibirskoye). This work will continue.

We also started working on Russia’s spatial
development strategy, which is aimed at using more effectively the economic
specialisation of the regions. This question was asked by the Communist Party
and United Russia.

In addition, we are creating a new model for macro-regional
development. Back to the Far East, in addition to the priority development
areas I already mentioned, we have established a state infrastructure support
mechanism and selected nine of the most promising projects, which in total
amount to almost 220 billion roubles. Six more projects will receive state
funding in the amount of 9.5 billion roubles through the Far East Development
Fund. We have also established special development institutions there, and prepared
a land bill. You must know about it because you have taken part in the
discussion. Construction of new houses, roads, and hospitals is underway there.

I would like to inform you that just yesterday I
signed a government directive approving a long-term plan for
Komsomolsk-on-Amur’s socioeconomic development. The reason behind this decision
is that almost 8 percent of its residents left the city in five years, despite
the fact that it is there that many kinds of state-of-the-art equipment,
aircraft and oil products are made. This is attributable to a deficient social
infrastructure. According to the plan, 50 billion roubles will go towards
addressing these issues. It goes without saying that this plan should be well
implemented.

Now, let’s turn to the fourth area. Of course, we can
produce oil and gas, and devise all kinds of measures to develop the industry.
However, nothing will work if the state is unable to operate efficiently. This
goes for all areas, from state governance and fighting corruption to tax
administration and oversight. This is absolutely clear to everyone and it is a
huge burden on the budget.

It was decided to reduce the number of civil servants
by 10 percent, effective 1 January 2016, and this also applies to those
employed by central and regional offices of all agencies that report to the
Government or federal ministries. As you know, similar decisions have been
taken regarding agencies within the Presidential Administration.

The Government also came up with an initiative to
create a single mechanism for administering tax, customs and other fiscal
payments. We have already partially launched this mechanism by transferring the
Federal Service for Alcohol Market Regulation and the Federal Customs Service
under the control of the Ministry of Finance.

Paying taxes has become a simple procedure. Of course,
everything is relative. In last year’s Doing Business ranking, which we refer
to so often, Russia was rated ahead of the United States, OECD and BRICS
countries. After all, it is much easier to pay taxes with the one-stop-shop
principle, rather than to several agencies.

We will also strive to make business inspections
simpler and more intelligible. We still have too many inspections, about 2
million per year, which creates a lot of opportunities for abuse. Let me remind
you that we have enacted a radical solution for small businesses by introducing
a three-year moratorium last year. A single registry was created so that anyone
can control the situation. However, we have yet to revise the whole system of
state supervision, as the President said in his Address to the Federal
Assembly, so that the system can effectively identify risks. We have to make
sure that inspections are carried out as and when needed, and not everywhere
and across the board.

State-owned companies are a separate issue. They cause
a lot of discussion and controversy. The state should know what are they
spending their money on: business development or corporate parties; how top
managers’ salary is calculated − whether it is based on the company's
performance or not − and react accordingly. This will be easier to do following
the introduction of the technical and price audit. I signed a government resolution,
which outlines the amount of dividends that state-owned companies will pay at
the end of 2016. This amount cannot be less than 50 percent of their net profit.
That way, the budget revenue will receive an additional almost 100 billion roubles.
One more consideration: an efficient state should efficiently manage its
property. If we see that a privately-owned company can make more money and pay
more taxes, it is in the interest of the state to let such a company go private.
However, every such transaction must be based on thorough analysis and number
crunching.

Everything that I said and everything that we do, we
do it with one and only one purpose − to make our people’s life convenient and
comfortable. Our people should be proud of Russia not just because we have
nuclear weapons or the world’s best ballet. People should be proud of their
country because the government always stands for them and protects them both
from external threats and from the fallout of economic shocks.

I will list the most important things that we managed
to accomplish under these difficult circumstances. I will start with
demographics. Let's face it: our country was simply dying out at some point. In
the past three years − for the first time since 1991 − there’s more of us in
Russia. Natural population growth amounted to 30,000 annually. Increasingly,
families are having a second, a third and even a fourth child, even despite
unfavourable changes in our
society’s age structure that
can be traced to the 1990s. The number of elderly people is up, which in itself
is a good sign, but they are a natural load on the working population.
Nevertheless, I would like to emphasise, so that we have a clear understanding
that this is the result of our joint work in recent years. We have achieved an all-time
high life expectancy of over 71 year in Russia. A few short years back, most Russian
men died before they reached 60. This increase in life expectancy is the result
of our social policy, which focuses on helping those in need, in a difficult
situation, and also those who are unable to deal with their problems on their
own, be it a retired person, a child, or a person with a disability. And, of
course, we focus on providing employment to those who are able and willing to work.

The Government is now focusing on populations that have
it hard, such as families with many children. Children grow quickly, incomes remain
unchanged, and expenses are rising. Such families need support in many forms,
not just money. They should have better opportunities to place their children
with kindergartens, or obtain summer vacation packages for them. Large families
need to have access to special home buying arrangements.

We have expanded the uses of maternity capital. The
programme itself has been extended by two years. Now people can make housing
down payment, including a mortgage initial installment, with maternal capital
money, while those who bring up children with disabilities can spend part of
the money to buy adaptation devices. Since last year, parents can receive
20,000 roubles as a one-time payment from their maternity capital. As of today,
2 million people are planning to use this right.

We discussed this subject with the President in the
evening yesterday, when I came to review the key points of the report I am
making now. Indeed, this is a difficult period. We have to cut programmes –
programmes that are important for this country. And yet, we must remember those
who are in a particularly difficult situation. I mean families with children. This
is why we have arranged to approve a decision on extending the programme for
one-time payments from maternal capital to 2016. We will pay 25,000 roubles per
applicant. For this, we will need 50 billion roubles, but we will find the
money.

We will continue monthly payments for the third child
and subsequent children, and the funds for this have been allocated in the
budget. We, at United Russia, by the way, held a forum on social policies not
long ago and I issued a number of instructions as regards support for families
with children. This year, the federal centre will undertake to co-finance
summer vacation opportunities for children in difficult circumstances. The
vacations are around the corner and the children should be helped not only with
the vouchers to summer camps but also with roundtrip tickets. As we have
agreed, all relevant resolutions have been approved.

We have also passed legislation designed to help
people whose utilities bill exceeds a certain aggregate income amount. The
state will subsidise these families.

The authorities in the regions should wind up within
three years the waiting lists for plots of land intended for families with many
children. If there are no opportunities of this kind, they should instead provide
people with housing or other types of support. And this is not the only option.
To enable as many people as possible to buy a flat, we are moving in several
directions at once. In 2015, we launched the Housing for the Russian Family
programme, which provides for the construction of economy-class houses, with
50,000 families volunteering to join the programme. Second, there is the
Housing federal targeted programme, under which over 40,000 families moved to
new housing last year. Third, the Mortgage with State Support programme came
under way in March 2015, for which almost 19 billion roubles have been
allocated to date. The programme enables people to buy housing on the primary
market at an interest rate no higher than 12 percent. Given that the programme
is quite efficient and in high demand, we decided to extend it until 1 January
2017. As is only natural, we will try to do our best to make social support
fairer and more targeted, so that it can reach those who really need it.

This is a difficult time for our senior citizens. We
must do our best so that they don’t fear old
age, have access to medical services and are able to buy medicines, and so live
active lives. The system of assistance for the
elderly must be overhauled in the next decades. We have outlined the basic
steps in our action plan to support the elderly through 2025. We are open to any proposals that can help deal
with these issues. By the way, after a
conference of social workers in Yaroslavl, I instructed governors to check the
situation at social care centres. In other words, I told them to go and see for
themselves.

We have adopted several practical measures in this
respect in the past few months. This year we
approved benefits for people over 70 in the payment of contributions to finance
major repairs. These benefits also apply to
people with disabilities. Last year, we
extended the Accessible Environment programme to 2020. Over 40 percent of vital facilities have been
included in this programme with assistance from people with special needs. About 30 billion roubles have been allocated from
the budget to buy technical rehabilitation equipment for the disabled. The same amount
of allocations (even though the
sum is huge) has been approved for this year.

Assistance will also be provided
to families that have children with disabilities. Starting this year, the
personal income tax relief has been increased for these children’s birth and
foster parents.

We have
taken measures to support the employment market. As a result, we have kept back
the growth of unemployment, which is a major achievement. Unemployment was
about 6 percent in March 2015, but it went down to 5.6 percent by the end of
the year. This is considerably better than in 2008 or 2009, when the unemployment rate was over 9
percent according to the ILO standards.

Eighteen
regions have been issued nearly 4 billion roubles, which they used to organise
the retraining of jobless and to find temporary employment for them. We also approved first
allocations towards increasing labour mobility.

We will continue to support the
employment market this year. The
approved budgetary allocations amount to 3 billion roubles, but our actions
will depend on the situation.

Of course, we know that people
must receive a fair and sufficient pay for their contribution, which is why we
need to consistently increase the minimum wage. This year, the minimum wage has
been increased by 4 percent. Acting under a United Russia initiative, the
Government will increase the minimum wage to 7,500 roubles or by 20 percent on
1 July, aiming to ultimately increase it to the minimum subsistence wage.
Frankly, this is a challenge, but we will deal with it one way or another.

Healthcare. The Health National Project was launched
10 years ago. The ten years that have passed since then were not in vain. The
results in this area are always clearly visible and easy to understand, since
the main indicator is life expectancy. Of course, other indicators can also be
used, such as the number of high-tech surgeries, the number of doctors who
leave to work in rural areas, the availability of inexpensive quality medicines
and queues at outpatient clinics. Let me share some numbers with you. These are
very important figures. From 2000 to 2015, maternal mortality dropped almost four
times, and the child mortality rate more than halved. During that time, 128
regional vascular centres were built, and many perinatal centres were created.
As you may remember, when we started out on this journey, high-tech medical
services were virtually non-existent in Russia. They are now available at 133
federal and 800 regional healthcare institutions. We were instructed to
increase the provision of high-technical medical services by a factor of 1.5
within three years. Not only did we deliver on this objective, but we exceeded
it. Last year, more than 820,000 people received the high-tech medical services
they needed. As you know, I oversaw this initiative personally. The number of
high-tech surgeries performed in Russia when the national project was launched
was in the tens of thousands, but now we have reached 820,000. Before, in order
to get things done, people had to travel abroad, and pay huge sums of money.
But now we are able to do many things without leaving the country. This is an
outstanding achievement.

There are also achievements to report in the
pharmaceutical industry. I have already shared with you the figures on
pharmaceutical production. Russia has finally started to produce
pharmaceuticals. As much as six new pharmaceutical production units were
launched, and new medicines are now being made, including those from the list
of essential drugs. Next-generation medicines are in the pipeline. It should be
acknowledged that Russian pharmacologists have already laid the groundwork for
future achievements. They are able to resolve the most complicated tasks. A
unique vaccine for preventing the Ebola fever was registered. We understand
that this is an important achievement, not merely because it can deal with an
exotic African illness, but because, first, it is a deadly disease, and second,
those who make such kinds of medication are at the very top of the
pharmaceutical industry. It is very important to reinforce these
accomplishments.

People need accessible medicines, so that when they go
to any pharmacy they can buy all they need without having to pay sky-high
prices. This situation has to be brought under control. In 2015, an additional
16 billion roubles were allocated to the regions for improving the availability
of medicines. A mechanism for state regulation of prices of essential medicines
is in place. The market may be important, but we are intentionally seeking to
introduce restrictions. Those who sell medicines at excessive prices are held
accountable. However, we need even more inexpensive products on the list of
essential medicines. Moreover, they should be made in Russia. In 2015, in an
effort to support pharmaceutical companies, the Government granted subsidies
for setting up production of substances. A number of projects were financed
through the Industrial Development Fund.

A few words about education. It seems that the most
successful initiative was the programme to build kindergartens, in accordance
with the 2012 presidential executive orders.

This work
involved us all – almost everyone in this room did their part. I met with
regional leaders during my frequent visits, and together we went to
construction sites – we saw it all happen. You just need to see people’s faces,
because that is the most important reward.

Today, nearly
all children from three to seven have an opportunity to enrol in preschools, and
all of those are modern institutions offering child development services and interesting
preparatory programmes for school. We all know how important this task is for
our future, what a huge and responsible job it is.

Some colleagues have
asked me, so I would like to inform you that I signed an executive order to
establish a professional holiday for those to whom we entrust our children: kindergarten
teachers and those working in preschools will mark their professional day on 27
September.

I hope that another
ambitious programme will also yield good results, just as with kindergartens –
I mean, of course, schools. Ten years from now, the total number of pupils will
increase by 3.5 million, and they all deserve to go to modern schools. The
amount of support for this programme to be provided by the federal government
alone (estimated at current prices, of course, but the prices may change) is
about 2 trillion roubles. We will need to provide this much over the next
decade. This year, we allocated 25 billion roubles at the Government meeting, based
on the decisions we have made, and the money went to the regions for the
construction of schools.

We have achieved
good results in promoting our universities to the group of top-notch universities,
the Top 100. What is most important though is that many universities have moved
up in national rankings, and more universities are included in all the rankings
now. This is very important because it means they now provide a higher quality of
education. We will definitely continue this programme because there is no other
way. Some of these universities receive state support to increase their
competitiveness.

The higher competitiveness
of universities is directly linked to the scientific research they do. More and
more universities are involved in joint research projects with academic
institutions of the Russian Academy of Sciences. This gives their students an
opportunity to have a career in research. There is no spending too much on
science, of course, but for the past 10 years we made sure there was a steady growth
in financing – almost by 350 percent. In 2015, we adopted a number of decisions
to improve our funding mechanisms for basic research. We eventually came up
with this principle: we cannot cut the share of GDP spent on basic research. In
addition, a significant portion of the basic research budget is allocated on a
competitive basis now. To do this, we topped up the capital of our research
funds. That additional capitalisation amounted to 28 billion roubles in 2015.

This work
involved us all – almost everyone in this room did their part. I met with
regional leaders during my frequent visits, and together we went to
construction sites – we saw it all happen. You just need to see people’s faces,
because that is the most important reward.

Today, nearly
all children from three to seven have an opportunity to enrol in preschools,
and all of those are modern institutions offering child development services
and interesting preparatory programmes for school. We all know how important
this task is for our future, what a huge and responsible job it is.

Some colleagues
have asked me, so I would like to inform you that I signed an executive order
to establish a professional holiday for those to whom we entrust our children:
kindergarten teachers and those working in preschools will mark their
professional day on 27 September.

I hope that
another ambitious programme will also yield good results, just as with
kindergartens – I mean, of course, schools. Ten years from now, the total
number of pupils will increase by 3.5 million, and they all deserve to go to
modern schools. The amount of support for this programme to be provided by the
federal government alone (estimated at current prices, of course, but the
prices may change) is about 2 trillion roubles. We will need to provide this
much over the next decade. This year, we allocated 25 billion roubles at the
Government meeting, based on the decisions we have made, and the money went to
the regions for the construction of schools.

We have achieved
good results in promoting our universities to the group of top-notch
universities, the Top 100. What is most important though is that many
universities have moved up in national rankings, and more universities are
included in all the rankings now. This is very important because it means they
now provide a higher quality of education. We will definitely continue this
programme because there is no other way. Some of these universities receive
state support to increase their competitiveness.

The higher
competitiveness of universities is directly linked to the scientific research
they do. More and more universities are involved in joint research projects
with academic institutions of the Russian Academy of Sciences. This gives their
students an opportunity to have a career in research. There is no spending too
much on science, of course, but for the past 10 years we made sure there was a
steady growth in financing – almost by 350 percent. In 2015, we adopted a
number of decisions to improve our funding mechanisms for basic research. We
eventually came up with this principle: we cannot cut the share of GDP spent on
basic research. In addition, a significant portion of the basic research budget
is allocated on a competitive basis now. To do this, we topped up the capital
of our research funds. That additional capitalisation amounted to 28 billion
roubles in 2015.

A few words about culture. This year is Year of
Russian Cinema, which took over from Year of Literature and Year of Culture.
Perhaps, next year will be Year of Theatre – we are currently working on it.
Such years are a way to liven up people's interest in good books, good plays,
good films and good exhibitions. Since 2015, museum admission has been free for
children and young adults 16 and under. Perhaps, this is the most important
recent decision in the sphere of ​​culture. I am confident that it will have a
lasting effect.

Another major
project has to do with building cinemas in small Russian towns. As many as 143
modern high-tech multiplexes will be built in the Russian regions before the
year runs out.

Colleagues, last year we had to deal both with
important and routine issues that are part of the Government’s and the State
Duma’s competence. However, some of those challenges were not so trivial, such
as the tragic events, the war that the terrorists had declared on the entire
civilised world, including Russia. Following the terrorist attack in the skies
above Sinai, which killed our citizens, we engaged in urgent retrieval of all
Russian tourists from Egypt. It was not an easy operation, to tell the truth.

The situation in Crimea
also required emergency
measures on our part. That
situation can
be rightfully called energy
terrorism. The criminals
who blew up power lines right before the onset of winter created a life- and
health-threatening situation for many people. Many hospitals, schools and
kindergartens were left without electricity or heating. Portable generators
were dispatched to Crimea,
fuel reserves were formed,
and socially important facilities were switched
over to
backup power sources. To
protect people from such a disaster in the future, we are building an energy
bridge across the Kerch Strait. The first phase was completed in December, and
the second will be ready soon. We will continue to build roads, kindergartens,
schools and hospitals in Crimea. I am saying this because, for two consecutive
years, much of what I said in response to your questions and in my remarks when
I spoke in the Duma concerned Crimea. This time, I chose not to do so, because
Crimea has become a regular Russian region, which is perhaps the main result of
our joint work. This is our land and our concern no matter who says what, and
we will continue our efforts there.

Colleagues, looking back at the years that we have
worked together, it is clear that those were the years of hard work, although
it may sound like a figure of speech. However, objectively, we can compare what
we have now to what was there 10 to 15 years ago. Those years were not exactly
a walk in the park. However, I also realise that we did our best to not only
take our country through difficult times, but also give it a foundation for
another period of further growth. We did our best to make sure that overcoming
the crisis is not the sole purpose of the Government and the State Duma. We did
our best to make sure that today's challenges do not obscure our future. We
consider all our steps as a kind of springboard that will allow Russia to not
only neutralise the aftermath of economic shocks, but, above all, to improve
people's lives and, of course, have Russia take a place of its own in the
global economy.

The world is moving to a new economic and technical
order. Many markets are still taking shape, and the underlying production
chains are just being formed. Our common goal is to make sure that Russia does
not remain an onlooker as the world moves towards its economic future. This is
the raison d’etre of any Russian politician of all times, regardless of the
election cycles. Let me quote the words of Pyotr Stolypin, “As we try to
protect Russia, we must unite and harmonise all our efforts, responsibilities
and rights to uphold our country’s higher historical right, which is the right
to be strong.” We have all it takes to do so and, most importantly, we have
faith in our country. Thank you.